Gap Earnings Fall 68% but Top Raised Forecasts

Gap Inc., the largest specialty apparel retailer, said Thursday that profit dropped 68% in its fiscal first quarter as sales continued to sag, but the results beat analysts’ recently raised expectations.

The San Francisco-based company, which operates the Gap, Old Navy and Banana Republic chains, reported earnings of $37 million, or 4 cents a share, down from $115million, or 13 cents, a year earlier.

Sales fell 9% to $2.9 billion in the quarter ended May 4, while sales at stores open at least a year plunged 17%.

Gap said a week ago that its April sales decline was not as steep as expected. Analysts raised profit estimates to 2 cents, on average, from an earlier estimate of a 4-cent loss, according to Thomson Financial/First Call.

Gap has been struggling to come up with a merchandise assortment to woo back customers alienated by the ill-fated foray into overly trendy apparel two years ago.

Summer-themed merchandise at Gap and Banana Republic isn’t selling any better than the stores’ spring assortments, but some improvement can be seen at Old Navy stores, Chief Executive Millard Drexler told analysts.

“Our results haven’t yet caught up with our efforts,” Drexler said.

This summer, the company is pushing its classics--denim, khakis and white shirts.

Gap rose 7 cents to $16.89 on the New York Stock Exchange before results were released and reached $17.32 in after-hours trading.